With prices for just about everything still rising at gradual rates over the last couple of years, it should come as a comfort to know that inflation rates are beginning to slow. An inflation gauge, which is closely monitored by the Federal Reserve, rose 6.3 percent in April over the last year – the first sign of slowdown since November 2020. The Commerce Department has also reported that their inflation figures fell below the four-decade high of 6.6 percent. While the overall inflation rates are still running high and creating further hardships for millions of Pennsylvania residents, these new signs of slowing price increases, if continued, could provide some much-needed relief.
The Commerce Department has also reported that consumer spending rose by 0.9 percent from March to April, outdoing the month-to-month inflation rate for the fourth straight time. The economy, though struggling, has been sustained by consumers still spending money freely despite regular price hikes. “Inflation is finally slowing, but it’s a little early for high-fives,” said Bill Adams, chief economist at Comerica Bank. Adams noted that gas and food prices have risen in May and that Russia’s war against Ukraine and COVID-19-related lockdowns in China could further disrupt supply shortages and send prices accelerating again. The continued spending by Americans despite higher inflation rates is due mainly to wages rising across much of the country – a factor that economists say could boost spending and ideally support the economy for the year.
Chair Jerome Powell has pledged to keep ratcheting up the Federal Reserve’s short-term interest rate until inflation is “coming down in a clear and convincing way.” Those rate hikes, however, have created concerns that the Federal Reserve, in its push to slow borrowing and spending, may drive the economy into a recession. Those concerns have led to sharp drops in stock prices over the last two months, though markets have somewhat stabilized since. Powell has also said the Federal Reserve is aiming for a “soft or soft-ish” landing, in which wages, consumer spending and growth slow, but ultimately prevents the economy from spiraling further downward. Most economists say that while such an outcome is plausible, they doubt it can be achieved.
The White House released its plans for fighting inflation last month, largely reiterating long-time proposals of the administration to cut back reliance on fossil fuels, lowering prescription drug and healthcare costs, and investing in infrastructure. Because the president doesn’t have the power to unilaterally make all of the suggested changes, the plan is essentially a wishlist for Congress, which hasn’t shown bipartisan support for most of the proposals.